Pasco County meeting record

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1Aug 6, 2024
Board of County CommissionersC45Consent agendaApproved
Approved minutes
Approved Staff's recommendation with the change to look at the rates at three years versus five years.
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27m
Unidentified speaker
Yes,
Jack Mariano
Mr. Chairman Mariano Mr. Thomas come in to give us a presentation on this.
Pasco County
Good morning, Mr. Chairman, uh fellow commissioners. Adam Thomas Torres, I'm Director of Pasco County. Uh C45 is a request to amend the restated ground lease agreement at the Wiregrass Ranch Sports Campus of Pasco County, uh the hotel ground lease at for the residents in Marriott Wesley Chapel. So before you today is a request to approve the ground lease and the amended um the amendment to increase the uh
ground lease terms to twenty one hundred. Um On WebEx with me today is uh Michael Birth. He is the Vice President of Peace Tree Group, who is the new developer for the Sports Park Property Hotel.
Unidentified speaker
Okay.
Ron OakleyChair
Okay.
Jack Mariano
Ms. Mara? Well, when we put this lease together it was very favorable terms. Um I had some people in the marketplace that did done funding on their own, financing on their own that they thought it was a really strong deal, wonder why we'd would n would have done it just the way we did it. Uh and we did it the proper way, but The terms are very favorable. This extension all the way through um is a very generous extension. And I had trouble with it even though we've got
some provisions coming and they're gonna help us with accelerations for increasing the rates as uh things will will dictate. But one of the questions I asked Adam was what is the average daily occupancy rate? And um what was the number?
Pasco County
Currently, as it sits right now for the year 2023, it's at 58.8% in occupancy, and their competitive set right now is at 74%. So what we're doing in terms of the ground lease to help offset the average daily rate is to help out with the ground lease agreement at $40,000 a year. Currently, it's at $25,000 a year. Year, we're going to 40 next year with some escalators built in every five years, depending on market studies, at three
to three to six percent. So currently as it sits right now, the adr is at around 180 189 dollars on.
Unidentified speakerVoice A
Don't use acronyms, just so
Pasco County
I'm sorry. Yeah, average daily rate. My apology. Average daily rate is around 189 dollars. For the year. So when these events come in, we are seeing leakage over to Hillsborough County because of the rates being too high. So we negotiated the terms on the ground lease to help offset the rate to help bolster occupancy, therefore generating additional revenue per available room for not only the hotel but also for the county.
Jack Mariano
So let me ask Michael a question. Michael, I know with departments in the area, they go through and they look at all sorts of numbers to what's in the marketplace, how they set their rates to probably maximize profit more than anything else. Um With your rate so low at fifty eight percent and I've talked to other hotel years years ago, they were like ninety, ninety-five percent occupancy in the Wesley Chapel area, which is why I think so many hotels came in. You're at fifty eight percent. It's such a low number. Um I
want to try to work with you on this, but I w I need to find some way that we can get that number up higher. And I don't I'm not even satisfied with seventy-four percent. I think the number should get higher. This is an ideal piece of property. I want to see it filled because This is an asset that we've got. It should be different than Hotel. We should shoot be shooting close to 100%. But I wanna know how you can How you how you how you set your numbers up to get to only fifty per eight percent when the market is so 74%.
Unidentified speakerVoice B
Work.
So for context or who owns the asset now for a week and a half.
Because as part of our business plan is in our underwriting is right sizing this occupancy comparatively to the competitive set. Um you know, there's clearly a a difference in average data rate uh with the offset versus our own You're back. It's a premium location, it's a premium property. You know, for context, E we own and operate 85 hotels across 48 states, over 11,000 rooms. We've invested
$10 billion in the hospitality industry over the last 15 years. We are, you know, we have our own taxes management company. We work with our management company as well as the as the brands in this case, Marriott. on rentre management specifically to maximize those occupancy average daily rate and rent room for available room to you know to to ultimately um you know make sure that we are running the property as efficiently as as possible. Uh on average a resident in um you know should outperform
its given page set of hotels. And there's no reason again based off of the product Based off the location, next to such a uh interior square that's corporate. There's no reason the property should be performing as it as it was currently under the previous ownership. Um, and again, our our idea uh as we ask that, based on our experience with the product type uh within the Tampa area, is to actually this is this is so much counterintuitive to what. how we
typically uh underwrite a deal, but it's a lower rate considerably in year one in order to drive occupants to be a right size revenue per available road.
Ron OakleyChair
Mr. Burnett this uh Commissioner Oakley. Um I am interested you have uh the actual number, average room rates in that area I would assume, and your target is gonna be try to match that so you can increase your uh room room stays and percentages. So So this right now is just a guesstimate, but you think this possibly the change that room rate will would move it
on up to eighty or eighty five percent possibly.
Unidentified speakerVoice B
Well, so so typically in in hospitality there's a bit of a tipping point with regards to occupancy. The the goal is is ultimately not to run 100% occupancy unless, you know, uh those those last couple rooms are charging someone a a premium for a rate perspective. So the sweet spot for this type of of asset is probably given given competitive Set that I'm looking at uh I'm looking at the competitive set right now. I just got gym data pulled up. So
our competitive set for the for the trailer and 12 months in June uh 2024, the competitive set is running 73.4%, and we're running uh right at 65%. So if you look at the recent trends in the property, the the previous land. And again, these June numbers represent the previous ownership. We closed on July 23rd. So we again we are still very much getting our feed wet, so to speak, at the property level. But
the previous management was already starting to employ this strategy. There was a considerable considerable increase year-to-date and occupancy comparatively. So if we're looking at the number. The property in the new date period is up 20% of oxygency at just a 1% bump in rate. So they're starting to they were starting to understand where the uh you know where where the trends in the market were assembling and it already started to
somewhat employ our uh our own business plan uh as we go forward. So again, our goal is not to run 100% occupancy. It's impossible in a market like this. And most markets are kind of outside of Manhattan or approximate to a very busy airport. The idea here is to find that sweet spot and maximize those occupancy as well established pay rate to make sure that we are running the properties. uh as efficiently
as possible. We're ultimately fiduciaries to our investors as well. You know, we want to be good stewards to Pasco County, to Wiregrass. We're incredibly thrilled to be uh to be owning and operating this this asset. We see the potential. We're excited about the expansion of the of the fields and for hopefully subsequent expansions of the facilities.
Jack Mariano
Mr. Chairman
Ron OakleyChair
Mariano. Thank you for the answer. Yes, sir. Mr. Mariano.
Jack Mariano
And I and I appreciate that. I understand it's a business. You're trying to make money as much as you can. But we have a responsibility to our investors, the citizens of Pasco County. So we invested in this property to try to get it to a a high occupancy rate. And I think the deal that we cut before Um and maybe we should have more specifics to it. We should be shooting for a higher number. And I know from years experience talking to the people that were were running these things in Wesley Chapel in this area. without even
being on premises, they were running close to 90%, some 95% occupancy. I'm not even looking for that number. Uh but what I'm looking for is I want to get as many people in those rooms as reasonably possible so that number one they're not commuting from Hillsboro coming up here, spending money in Hillsborough coming up here. put clouding up our roads any more than up here. I want that thing as full as it possibly be. I don't mind giving a sweetheart deal in a sense, but I want something in return to show at least I'm gonna generate
more si more uh tourist tax money by having more people in there. I'm gonna have a bigger economic impact by having more people in there. So as much as your sweet spot for your investors. I don't think it's going to align with our sweet spot with our investors.
Kathryn StarkeyVice Chair
Well um what number do you think is
Jack Mariano
I I think at least eighty percent, eighty five percent we should be able to get in contract. And and you know, if a if a market thing happens like a covet, a hurricane, I'm willing to adjust from those numbers, but on a regular market event, I think we should be looking to get that number. That's it's a reduced rate that they're have this property at. It's at a prime location. with the thing. And and by the way, we still need to do more because we still gotta go build a garage out there. The parking out there and the big events, you guys have been out there, it's crowded as heck. We need to do something. So we need a
partner in there too to work to work on uh you know, getting a parking garage, whether it be extra revenue or you partner with us, something's gotta happen out there the way it's set up as well.
Unidentified speakerVoice B
From from an occupancy perspective, our our interests are completely aligned. We're trying to drive as many people to that hotel as possible. The last thing that we want to do is see leakage into Hillsborough County or anywhere else. Uh our our incentives are completely aligned based off of the current occupancy in in that market. I think looking today, getting to eighty percent, eighty five percent, I think it's gonna be difficult. Uh it it should you know
As things continue to improve, our interests are completely line. We don't want to see any leakage to any of the surrounding cameras. We want to keep as much business in the immediate area as possible.
Jack Mariano
Well, I'm gonna I'm gonna disagree with you just because as you say, your sweet spot, you're trying to maximize your profitability for your investors. We're trying to maximize it to the best economic benefit for Pasco County. That means more people, more heads and beds in that location, they're spending money in our area, they're off our roads as well, which frees up congestion as well. So ours are gonna be different, and that's okay. But but with this deal that you're looking to at to get from us, I want to get a a number to where we can go for as far as a higher occupancy rate than even just the regular market rate.
That's what I'm looking for.
Pasco County
Okay. Adam. So Commissioner, you're you're 100% right. We we want to fill capacity and fill occupancy at that venue specifically because of the investment that you all made into that sports park property. We're doing that on the event side and the structure of our events. We are at 83. I'm sorry, 92 events last year. We're at 118 events this year. We're driving demand. We're already getting people, we're getting our hotels filled. I'm sorry, we're getting our teams here. Our hotels aren't being
filled because there is leakage over into Hillsborough County because of the rate. So this this deal is helping. to subsidize some of that rate and and with hopes to boost that occupancy. So we are getting the traction here. We are getting the teams here on an annual basis and we're seeing an increase in events. Our goal was to have eighty percent of the calendar filled at the sports campus, we're at eighty seven percent in climbing. So we are getting the teams here, we are getting the traction here, we are getting the demand here, we're
just not getting them into the hotels because of the rates structure.
Jack Mariano
And exactly, so the rate structure they've got to bring their rates down to get more people in there because they're competitive market. So just like you're saying, you're doing a phenomenal job.
do like we're designed to do. Right now these guys are taken over, granted, the other guy before they're the new guy. But the numbers again for the market to what's out there and I don't know how broad based the seventy-three percent is as far as what the market is. I'm just saying, knowing the high percentage in Westley Chapel what these hotels were, that we should be striving for those numbers and with what you're doing driving in there, everybody's gonna want to stay in there if they can, if they can afford it. But if they price it too high, they're not gone. That's why I say that sweet spot, it's different from our alignment.
They want to maximize their revenue. I get that. But that doesn't align with us. We need to get more heads and beds. And th the more people stay in there, that's less
Unidentified speaker
traffic all around. I th I
Ron OakleyChair
think you're gonna find out this year with Adam and his team, what they're doing and the events they've got coming in, you're gonna see an increase in that hotel without any changes. uh that are gonna push that numbers up. And I think with these changes we'll we'll be confirmed they'll push those numbers up. And we got more events coming so you those automatically those numbers are gonna be up. 'Cause there's not going to be any lag time from, you know, doing a lesser number of events last
year to a higher number this year, that's gonna push that oxygen uh higher. So Ms. Starkey?
Kathryn StarkeyVice Chair
Mr. Mariano, I mean they're in the business to make money. Why wouldn't they be setting hotel rates that would fill their hotel? So I'm confused because obviously they want to fill their their hotel up.
Jack Mariano
Mr. Chairman Mariano. Yes. So and and I like I said, they are in the business of making money. We're in the business to maximize our tourist development dollars investment. We benefit more when more people are in there.
Kathryn StarkeyVice Chair
So do they.
Jack Mariano
They hang on. They benef no, they benefit more when they maximize revenue by keeping a higher price. Their higher price is what's keeping the r the room rate down. I'm trying to get it to where we're gonna get to a higher number. And if other people in the Wesley Chapel market, which I'd love to look at that study, If those number th if they're higher like eighty, eighty five percent, we should be looking to that number. So maybe maybe there's a way to tie it into the market in the Wesley Chapel area. I think we're looking
Kathryn StarkeyVice Chair
at that number.
Um and I think David Goldstein worked may worked on this. But um Is it possible to say that the the room rate must be competitive within X amount of dollars within a certain uh geographic area?
Pasco County
I'm gonna have to defer to Michael on that one 'cause that's that's that'll affect his business and bottom line, so I'll I'll defer to to Michael on online.
Unidentified speakerVoice B
Yeah, I and and listen, I I I think ultimately our what we're talking about, our interests are very much a aligned. We are you know we're professional hotel operators, we we utilize revenue management through our own sales, through the brand. You know, again, uh we're we've been in this asset for ten days. Uh we are already relevant the operations. I think that ultimately, again, our interests are
very much alive. We want to maximize occupancy at this hotel. We're not going to do it at the to the detriment of the business. If if rate in a given week is X, we're not going to charge it to X. We're going to charge what the rate what the market will bear in order to maximize our occupancy in this in this hotel. I mean again this is this is our this
is our business. This is our uh you know we've got a full operating platform, we've been operating hotels for 15 years, we've operated this exact product type in very similar markets across the country. Um, you know, this this this is this is our full competency and and we feel like we're pretty good at this. We've been doing it a long time. We can invest with all other place and and when we invest in a different market, we're not just there to maximize our cost. Like if ultimately our our entry
um both from a county perspective and from a P3 perspective are maximized when they're aligned. And and we want to be good stewards of the asset, we want to be good stewards of the of the white. We want to be good stewards of the county because ultimately that's going to help us maximize our business. And obviously the uh the ability to fill rooms is at the crust of all that.
Seth Weightman
Chairman? Yes sir. Thank you, Chair. Adam, in the in the contract, is there a change in wall clause clause in there if we see something shift in the market, do we have the ability to Capture the increase that Commissioner Mariano says a year or two, twelve, twenty-four months from now? Current no sir.
Ron OakleyChair
So it's a five-year term, right?
Pasco County
Uh it's a twenty-five-year amendment to the the ground lease with options, uh three additional options for ten year renewals. So it takes it takes it into twenty twenty uh twenty one hundred, but there are extensions that can go to twenty seventy so if if need be
Seth Weightman
so there's no opportunity to do every twelve, twenty four month say a rate review working with Michael Warren and you guys every five years. Well Michael would you be opposed if we did a rate review and twelve e every twelve months to make sure that the the board's somewhat concerned there. I'm just looking to get to make a happy medium. I personally I think Odd that the government's in the hotel business, but I digress on that point. But I think this thing needs to get across the finish line and unless you guys go to work, but I just want to make sure everybody's
comfortable with this contract.
Ron OakleyChair
Uh I d I feel like that twenty f every twelve months is a little too soon for a business that's operating like this. So
Kathryn StarkeyVice Chair
what about three?
Seth Weightman
I'm just throwing something I'm not gonna say I understand the hotel business. I'm just throwing something out there. Again, I'll have to defer to to Michael on on that. Okay.
Unidentified speakerVoice B
So we we've we've worked uh in hand on with uh with the board, uh with the The attorney's office over the last four months to craft this agreement. I think when you if the goal here is to maximize occupancy of the asset at the expense of rate to make sure, again, that the property or the competent set in general is not overcharging. I think if we're looking at a 12-month reset, that
directly needs To potential increases in the NRC rate. And again, ultimately, that lease payment is to the you know, this is the commissioner's uh point, that that lease payment is uh is part of our profit loss payment. And ultimately, if that if that lease payment becomes overly onerous at the current rate structure, rates inherently will have to rise. I think the way that we've structured it specifically. I mean again going back to our first conversation with David Goldstein, with Adam, with
Consuelo, it was centered the right on the sensitivities of average daily rate at this property with the with the kind of mindfulness to make sure that we're not creating some bonerous rent structure that ultimately will lead to us to believe them in the sense. hesitating us to have to increase rates uh at an accelerator rate to cover those those right payments.
Unidentified speaker
Mr. Chairman
Unidentified speakerVoice B
Mariano.
I'll be at least based off of that exact point that Commissioner brought up.
Jack Mariano
Mr. Chairman Mariano. Mr. Mariano. So Michael, I I tell you I wish this had come before us one on one interviews to kind of look at this thing ahead of time. Uh especially where we just had a contract we had to end 'cause it was a bad contract for us. It cost us a bunch of money. So before I go to another contract extending it all out, I want to make sure we're in good terms. Have you looked at the what what is your opinion as far as the market? And I and I'm not sure if I'm gonna get a good answer or not from you, but As far as the the price that we're charging you, how does that co coordinate with the market as far as the balance out there compared to your other properties?
Unidentified speakerVoice B
Yeah, I I think it's I think it's absolutely commensurate again with uh with with the ground revenue. Uh and I'll be honest with you, you know, we typically shy away from from leasehold assets because of um because of of owners' loose payments. I mean we've we've done a significant amount of diligence. We paid uh a very aggressive price uh on this asset based off our belief in the in the long term Liability of the of the property, of the expansion of Wiregrass ranch, of
the growth of the Leslie Chapel and Pasco area, Pasco County areas at large. We've studied extensively through third parties, through our own research, the macroeconomic trends of the market. This is an asset that we have in the significant. Amount of conviction that if we're talking a half million dollar lease payment, that obviously changes the profitability and the viability of the asset. I think in general, when you're
talking about just on a pure marketability basis, you know, the the the you know the market looks at leasehold uh fairly differently. that it does be simple actually internally and and I think this is a this is a um you know is a uh a a down the middle of the road lease it's obviously with a a government authority those are the type of leaseholds that we uh that we feel comfortable with uh because of that there's
no it's not it's not privately held you're not dealing with 12 month rents that rent You know, that that starts to become a snowball rolling downhill. And again, the the pains become odorous, and it's gotta come, you know, you've got to figure out a way to cover it at some point when those when those numbers do become large, and it's not through occupancy. Unfortunately, it is too late. But I think again, looking at the economics of the lease, looking at the economics of Extensions, the
extensions that we're requesting. We've mirrored the current uh economics and accelerators of the extension. We think they're fair and we think they're equitable to all parties. Again, the idea here is to uh create a partnership going forward. We work very closely with the tourism board. We're excited for the prospects of the ownership of this asset. and growth of the market.
Jack Mariano
Well, I'll say Commissioner Weightman, I think you bring up a good thing. I'd like to take a look at it. It doesn't have to be every year. I'm okay even with three years to take a look at it again to see how we're doing before we uh go on. I think you know I respect what you're trying to do. Um the Marriott brand is a great brand to have as well. So I'm I'm all for that. I just want to make sure that we take care of the investment we've made as well. Because we've got to go out there. I don't know if you thought about this, but I I don't think the I think the parking's an issue out there. We still got to deal with that issue. And if we have enough revenue, we can actually offset some
of that. But I want to make sure this deal works for us and I don't be locked in. Again, giving you guys an extra twenty five years and three five years on top of that, that's a long way to go without being able to claw back to say, okay, we don't like what you're doing because if your numbers still stay at the low numbers or even if they're at the market numbers, we still may want want more uh and could expect more with the premium of the asset, depending how great a job Adam Adam's done with his team.
Pasco County
Adam. The the parking issue and concerns, we share the same concerns. The hotel sh uh shares the same concerns. Uh everyone at the sports campus shares the same concerns. Even our events owners share the same concerns in terms of parking because now you're now you're Dealing with the visitor experience, right? So that is going to be identified in the invitation to negotiate that's currently closed out. So hopefully the said proposal bidders on the invitation to negotiate will actually come with a
plan to handle the parking.
Okay.
Ron OakleyChair
Ms. Starkey.
Kathryn StarkeyVice Chair
Um just uh looking at your photos online and I I don't think these are stock photos, but I um I'd love to have the opportunity to talk to you about putting some very tasteful photos of assets in Pasco County in your hotel. So maybe Adam and I can meet with you and help market some some of the fun places to go see and activities to do in the county.
Unidentified speakerVoice B
We would welcome that opportunity.
Kathryn StarkeyVice Chair
All right. So with that I'm gonna move it for approval. Second. With the change to three three years or five years.
Ron OakleyChair
Okay. Do what now? What's your
Kathryn StarkeyVice Chair
there we didn't uh we did a change to look at the rates in three years versus five years.
Ron OakleyChair
Okay, I have a motion and a second. Is is this a um
Is it a roll call vote or just a roll
Unidentified speaker
vote? No more normal vote.
Ron OakleyChair
Normal vote.
Unidentified speaker
Okay.
Kathryn StarkeyVice Chair
Uh clarification, I believe there
was
a second from Commissioner Weightman and
Ron OakleyChair
then you
Kathryn StarkeyVice Chair
called for uh
Ron OakleyChair
second from Keateman. But she's she's sitting here, Mr. Weightman, I don't believe. No, I didn't. Sorry. Ms. Starkey had the motion and Mr. Weightman had the second. All those in favor say aye. Aye. Aye. All opposed like that? Okay. Motion approved. Thanks,
Jack Mariano
yeah. All right.
Thanks, Michael.
Ron OakleyChair
All right, that ends the uh thank you.

DMO-24-0131

Official title

Every appearance1 of 1 are in a recording